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US Steel's Section 337 antitrust claim rejected by ITC commissioners

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The US International Trade Commission (ITC) issued an opinion dismissing United States Steel Corporation's antitrust claim made under Section 337 of the Tariff Act of 1930 against several Chinese steel manufacturers or distributors, ruling that a complainant must show an antitrust injury even in a trade case.

What happened

On Monday, March 19, three of the ITC's four sitting commissioners upheld an administrative law judge's (ALJ) decision to eliminate the antitrust claim from US Steel's trade case against Chinese steel manufacturers.

US Steel's claims were made pursuant to Section 337 of the Tariff Act of 1930. Section 337 has primarily been used by US companies to bar the import of items that infringe upon intellectual property rights. A violation of Section 337 requires a showing of "[u]nfair methods of competition [or] unfair acts in the importation of articles."

US Steel took a rather novel approach and based one of its Section 337 claims on Section 1 of the Sherman Act. Specifically, US Steel alleged a conspiracy between the Chinese manufacturers to fix prices at below-market prices and control output and export volumes. Though US Steel based its claim on the Sherman Act, it argued before the ALJ and the ITC that it did not need to show antitrust injury to sustain its antitrust claim. US Steel reasoned that because Section 337 is designed to protect American companies and workers, it needed only show harm to those groups.

In November 2016, an ALJ granted the Chinese manufacturers' motion to dismiss the antitrust claims, confirming that US Steel is required to show antitrust injury to state an antitrust claim under Section 337.

The ITC affirmed the ALJ's dismissal of US Steel's antitrust claim because it did not meet the pleading requirements of the Sherman Act under substantive federal antitrust law; such an antitrust claim requires antitrust injury to be alleged. The ITC explained that it relies on existing bodies of substantive federal law to avoid conflicts with federal precedent.

Under US antitrust law, for US Steel to properly allege antitrust injury on the allegation that its competitors fixed prices at below-market prices, the below-market pricing must be predatory. That is, US Steel would be required to prove (a) below-cost pricing and (b) that the Chinese steel manufacturers had a dangerous chance of recouping their losses. US Steel did not—and conceded it could not—satisfy the pleading standard for predatory pricing.

What this means

The ITC is not an alternative venue with a reduced pleading requirement to federal court for trade-based antitrust claims. A complainant with a Section 337 antitrust claim before the ITC must satisfy the same antitrust pleading requirements that a plaintiff in federal court is required to satisfy.

A Section 337 claim asserting that foreign companies are fixing prices at below-market prices and thereby undercutting the prices of domestic competitors is unlikely to be successful. To win an antitrust claim with this fact pattern, a Section 337 complainant has to prove predatory pricing, which requires two showings: (1) below-cost pricing and (2) a dangerous chance of recoupment by the respondent.

For further information on this topic please contact William Díaz at McDermott Will & Emery's Irvine office by telephone (+1 949 851 0633) or email (wdiaz@mwe.com). Alternatively, please contact Jonathan Ende at McDermott Will & Emery's Washington DC office by telephone (+1 202 756 8000) or email (jende@mwe.com). The McDermott Will & Emery website can be accessed at www.mwe.com.

This update has been reproduced in its original format from Lexology – www.Lexology.com.

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